Meet Cass Sunstein – Obama’s superego

From: CNN/Money

In Simpler: The Future of Government, former White House regulatory czar Cass Sunstein argues that government rules can encourage healthier behavior.

By Tory Newmyer

FORTUNE — It’s an article of faith among conservatives that President Obama scratches his itch for bigger government by imposing job-killing rules on businesses as fast as his administration can dream them up. Mitt Romney invoked it frequently on the campaign trial, asserting that regulations had quadrupled over the last four years. That’s not true: One recent tallyfound that through the first 42 months of his term, Obama approved slightly more rules than President George W. Bush did in his second term and slightly fewer than in his first.

But the charge is gaining renewed currency as Obama embarks on his second term with a declared intent to accomplish by regulatory fiat what the opposition on Capitol Hill won’t allow. So it’s an auspicious moment for Obama’s first-term regulatory czar to drop his latest attempt at explaining the philosophy behind that rulemaking. Cass Sunstein, a friend of Obama’s from his University of Chicago Law School days, spent the last four years running the Office of Information and Regulatory Affairs (OIRA). It’s an obscure but exceedingly powerful perch that enabled Sunstein to put his imprint on everything from fuel efficiency standards and the redesign of the food pyramid to the rules for the landmark health care and Wall Street overhauls.

Sunstein used his office as a laboratory for his brand of “libertarian paternalism” — his self-described and seemingly paradoxical approach to structuring prompts for people that promote their welfare by protecting them from their more self-destructive impulses. (Think of a supermarket that encourages healthy eating by displaying fruits and vegetables in the front of the store while relegating junk food to the back.)

Sunstein’s approach is built on behavioral economics, which in recent years has upended centuries of belief that individuals are rational actors who will act in their own best interest left to their own devices. The science behind behavioral economics is largely established, but applying it in the policy realm remains controversial in some quarters. Detractors conjure Big Brother, a specter that inspired Glenn Beck to label Sunstein “the most dangerous man in America.”

In Sunstein’s telling, his method is a lot more benign. He calls it “Regulatory Moneyball,” an effort to lift rulemaking out of the arena of knee-jerk politics and subject it to the rigors of empiricism. His new book is called Simpler: The Future of Government. It’s a kind of follow-up to Nudge: Improving Decisions About Health, Wealth, and Happiness, the 2009 bestseller he wrote with behavioral economist Richard Thaler. Sunstein does his best to drain his approach of any ideological spirit. After all, how pernicious can nudge-based regulation be if it’s been embraced by the likes of Conservative British prime minister David Cameron, who has established his own “Nudge Unit” to promote smoking cessation, energy efficiency, and organ donation?

Sunstein draws a straight line from Obama’s embrace of the office back to its empowerment by Ronald Reagan. It was Reagan who first gave OIRA its mission of overseeing all federal rule-making. In a bid to choke off burdensome regulatory mandates, Reagan also required OIRA to ensure that the benefits of new rules outweighed their costs. Sunstein accepted this mandate wholeheartedly. Indeed, crunching costs and benefits has been a central preoccupation of Sunstein’s, although the results frequently frustrated liberals. They stewed during Obama’s first term when the White House declined to tighten certain environmental and workplace standards, and they panned nudges as limp.

Sunstein argues persuasively that quantifying upsides and downsides and laying them bare improves both markets and government. One of his wins was replacing the miles-per-gallon standard for cars — which turns out to be a non-linear measurement of their fuel economy — with one that states how many gallons they use over 100 miles, as well as expected fuel costs over five years, making side-by-side comparisons more meaningful.

Applying that same discipline to policy decisions can prove trickier. Because his office had to weigh the economic impact of any risk-reducing regulation against the lives it would save, it had to assign a dollar value to a human life — or, more precisely, the dollar value of eliminating the statistical risk of a death. Sunstein’s team answered this grim question by weighing both what individuals say they would pay to eliminate the risk of one death out of, say, 100,000, and calculating the wage premiums that companies pay to reward that risk. Based on that math, the government currently values a human life at roughly $9 million.

The practice of working through those calculations acts as a curative in the heart of a political system that’s too often jumpy and reactive. That said, Sunstein’s book displays some of the restless energy of its polymath author and feels a bit disorganized. But considering it’s addressed to the task of streamlining our regulatory regime — not exactly the stuff of page-turners — it’s a remarkably fun, engaging read. And to illustrate the frailty of our rational systems, he makes his arguments with memorable examples from pop psychology. Those who scoffed at New York City mayor Michael Bloomberg’s ban on supersized sodas — a textbook nudge — might be struck by the experiment in which subjects were told to eat as much Campbell’s tomato soup as they wanted, without being informed that their bowls were designed to refill themselves through a device hidden under the table. Many just continued eating until the experimenters finally stepped in to stop them.

It’s a characteristic example, and the book is perhaps most useful as an insight into the man who functioned as the superego of the Obama White House. Like the president he served, Sunstein takes pains to frame his program as post-partisan. He invokes scientific method in pursuit of testable, provable solutions to entrenched public policy problems. And yet at bottom this approach rests on a belief that government, informed by experts, should be equipped with the tools to save us from ourselves. He may be right. But Sunstein must also appreciate that our American id can’t help but object.